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Just negotiated defaulted SL's, I think I feel better


UnrulyJulie
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Here's the dealio:

My student loans defaulted on 4/16/04. The breakdown:

23 total dispursements totaling

$35,017.75 principal

861.84 interest

7,060.91 collection fees

$42,940.50 outstanding

I contacted General Revenue Corp., the in-house CA representing USA Funds/Sallie Mae. They were extremely nice and seemingly helpful, unlike the typical nasty CA. They made a "deal" with me which will keep me out of the US Dept. of Ed (apparently a very bad thing) and will erase all 23 of my defaulted dispursements from my credit report within 12-14 months when at that time the loans will be transferred back to Sallie Mae. In the meantime, they are willing to provide a statement to any creditor, such as an auto or mortgage lender, before the 12 months is over to show I have been making regular payments. I settled to make payments of $458 per month over 10 years. Also after the 12 months is over, they will negotiate removing more of the collection fees and even give me the option to defer in case of hardship. The contracts are on their way to me in the mail.

So what do you think? Do you think they'll do good on this offer? Anyone ever make a similar deal with these people? I do feel a lot better, by the way....at least the outlook is very good that in 12 months my score will be dramatically improved.

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They have offered you a rehabilitation....nothing out of the ordinary. It is standard arrangement. After 12 monthly payments, USA Funds will buy you back. However, any statement they send to you in the interim will not indicate that you are still in good standing...a default is a default. Any payment history we ever sent out for USAF was stamped with a "default, not in good standing" stamp. My experience is that a mortgage lender will not touch you until after the rehab is completed. Making payments on a default does not give you any credit for making timely payments...nothing is reflected on the credit report. Only after the rehab has been completed and the repurchased completed, will they remove the negative trade lines.

On negotiating removing fees?? Aint going to happen.

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Thanks for your response.

Yes, it was a rehabilitation deal. And according to the guy I talked to, it was the best option toward repairing my credit. The only other option he explained could get me out of default faster in 3 to 4 months, but was some sort of thing that the US Dept of Education would take over, it would show as a transferred account and ultimately not help my credit in the long run. I can't remember all the details of his explanation of that, but the rehab clearly seemed the way to go for me.

As far as the lenders go, he said that it happens all the time that if they fax a statement to the lenders showing regular payments being made during that 12 months, it helps. I tried to lease a car a few days ago and the finance guy said that my defaulted student loans were the main issue and if I could get it cleared up to some extent, with a letter or what-not, then they could consider me.

Anyway, I guess in a round about way you are telling me I did the right thing? :D

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With this young a default, yes it is the best way to go. However, collectors are not permitted to indicate to any lender that you are in good standing. Why?? Because historically this was done for the debtor and the day after the payment history or payment arrangement letter was faxed, the debtor disappeared. Clients do not permit it, including USAF.

One thing I would recommend...after your rehab goes thru and your credit report is cleared, consolidate your loans with the Dept of Ed. Your payment will be much more manageable!

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One thing I would recommend...after your rehab goes thru and your credit report is cleared, consolidate your loans with the Dept of Ed. Your payment will be much more manageable!

Yes! If I understood correctly, the guy told me that once the 12 months were over, the 23 dispursements appearing as separate loans on my CR would disappear and there would then be just one, as if the consolidation is already set to take effect. Did I understand him correctly? And must I consolidate with Dept. of Ed, rather than having Sallie Mae consolidate them?

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  • 2 weeks later...

The repurchase does not happen automatically, it is more of a manual process. From my experience it could take a month or so...most of the borrowers I helped had to make the th 13 or 14 process. Talk to the agency that you are making payments to...they should be able to give you an idea. Paperwork has to be completed, submitted to the lender, lender has to issue funds. It will depend on volume and of course staffing....December can be a slow month. Then once the rehab is completed, it will go thru nornal reporting cycles.

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